Transfer of right to use goods is the taxable event; section 5-E could not reach inter-State or import transactions.

Section 5-E of the A.P. General Sales Tax Act makes the transfer of the right to use goods, not their actual user, the taxable event, and the levy cannot be based on implied language extending beyond that point. The provision also does not apply to transactions outside the State, in inter-State trade or commerce, or in the course of import, because Article 366(29-A)(d) does not enlarge legislative competence beyond constitutional limits. As the transactions were either inter-State or import transactions and arose before section 5-E came into force, the levy was held inapplicable and the assessee succeeded.

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Issues: Whether, in transactions of lease or transfer of the right to use goods, the taxable event under section 5-E of the A.P. General Sales Tax Act, 1957 is the transfer of the right to use the goods or the actual user of the goods, and whether inter-State or import transactions entered into before 1 July 1985 could be taxed under that provision.

Analysis: Section 5-E makes the transfer of the right to use goods the taxable event. The actual use of the goods is not the taxing event, and in the absence of express language the user of the goods cannot be treated as the basis of levy. The provision also cannot be applied to transactions that took place outside the State, in the course of inter-State trade or commerce, or in the course of import. The constitutional position recognised in Article 366(29-A)(d) permits taxation only within the limits of legislative competence, and clause (b) of section 5-E could not extend the levy beyond those limits. As the transactions in question were either inter-State or import transactions and, in any event, arose before section 5-E came into force, they were outside the purview of the levy.

Conclusion: The levy under section 5-E was held inapplicable to the transactions in question, and the assessee succeeded.

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